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Presented by:

Saptarshi Ray
Roll no: 9028

Faculty : Dr. Suvendu Bose

Date : March 18 , 2010

Venue : Calcutta Business School

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Contents

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 Overview of Indian Sugar
Industry
§India is the second largest producer of the sugar in the
world.
§
§India is the largest consumer of the sugar in the world.
§
§It is accounting for 15% of the world’s consumption.
§
§The Indian sugar industry remains the second largest rural
agro-industry, with a Rs. 700 billion annual turnover.
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§There are  600 operating sugar mills across India.
§
§About 7.5% of the rural population are involved in sugarcane
cultivation and ancillary activities

Source : Indiabulls
§ 4
SHREE RENUKA SUGAR

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Let ’ s Go to
Brazil

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 B ra zilia n su g a r
 Sugar/ ethanol sectorin
in d u stry
Brazil has low operating cost, high
scalability and highly conducive climatic conditions.

 Ability to cultivate significant portion of cane supply

allows capture of value of the agricultural part of the business.

 India, South Asia and the Middle East emerging as the

largest single sugar import markets in the world with
increasing challenges of land and water availability
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E th a n o lO u tp u t

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 Vale do Ivaí p ro file
• Established in 1981 by the Longo family
• One of the main sugar and ethanol players in the state of Paraná .
• Cane cultivation on over 18,000 ha of land on long lease
• Currently the company has an installed crushing capacity of 3.1
million tons in two mills: São Pedro do Ivaí & Cambuí
• Part ownership of common logistics infrastructure including port
terminal and rail- side storage terminal

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 Equipav profile
 It consists of two very large and modern sugar/ethanol mills with
integrated co-generation facilities in Sao Paulo state in Southeast.

It has combined cane crushing capacity of 10.5 million tons of cane

per annum(44,400tcd).In addition,

 The proximity of the two mills leads to the creation of a strong cluster
(radius of 75 kms) .

 Cane supply comes from the cultivation of about 115,000 Ha of land

of which 85,000 ha is farmed by the Company with very high level of
mechanization for both planting and harvesting.
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R a tio n a lb e h in d
aqcq u isi tio n
Supply & Demand
q

qGlobal crisis
q

qBad weather

qDemonstration effect
q 13
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Source:
UNICA

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Source:
UNICA
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Vale do Ivaí:
Logistics

Source:
UNICA 17
Equipav logistic

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 Vale do Ivaí deal Details

• Enterprise Value of the company = USD 240 mn

• Approximately USD 82 Million outgo for SRSL and the

rest debt in the acquired company

• Debt Terms: 3 yrs moratorium +5 yrs principal repayment

Source : ET
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 Equipav deal details
Shree Renuka Sugars has entered into an agreement for
acquiring majority stake of not less than 50.34% with full
management control

 Enterprise Valuation of R$ 2.064 billion (USD 1.147

billion)

 Total Primary Investment of R$ 450 million (US$ 250

million)

Exchange rate: 1 USD = 1.8 BRL , 1 USD = 46.04

INR
Source: ET
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 Debt Details

Company had net debt of R$ 1.53 billion (US$ 860 million) as on 31st

Dec 2009

 Local currency denominated debt R$ 912 million

 US$ denominated debt US$ 345 million

 Proposed Debt restructuring for Main Banks

 Debt Terms: 3 yrs principal moratorium + 7 yrs repayment period

 R$ 108 million will be paid towards initial amortization of loan

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 Plans for Equipav
 Reconstitution of the Board (9 in total, with 5 from Renuka, 1 independent
and 3 from Current shareholders)
 Renuka to have full management control. CEO and all other key officers
to be appointed by Renuka.
 Investment of R$ 218 million funded from Renuka infusion to complete
expansions in hand
 Increase of the cane crushing capacity from existing 10.5 million tons to
12
million tons by 2011
 Increase in the Co-generation capacity from current 203 MW to 295 MW
 Improve product mix (sugar/ ethanol) flexibility to 70:30 either way
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 E ffe ct o f a cq u isitio n
Ø
ØIncrease in sugar production capacity
Ø
ØAccess to additional 10.5 million tons of annual crushing
capacity
Ø
ØNow ranked amongst top three players of sugar globally Increase
in exports.
Ø
ØThe buyout would bolster its presence in the central and
southern region of Brazil and enhance its competitiveness and
size, globally.
Ø
ØEasy access to the main ports of Santos and Paranagua
facilitating exports to other countries
Ø
ØOwnership of 76667 hectares of cultivable land in Brazil. 23
Production Capacity

Source: ET

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Some financials after
merger

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 PROBABLE PROBLEMS TO BE
FACED
qThe acquisition was based on the assumption that sugar prices would
continue to rise globally in coming years due to the increase in
consumption.

qIncreased competition.
q
qRepayment of Equipavs huge debt
q
qCapital restructuring to be done.
q
qRs 500 crores to be injected towards increasing the working capital
of equipav.
q
qAdherence to the legal regulations of two countries
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Discussion

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